Kaushik Basu Says Make Bribe Giving Legal

To help a nation plagued by corruption scandals on a veritably daily basis, the top government economist has suggested a radical solution: Paying bribes should be legal.

Bloomberg News

Kaushik Basu argues that decriminalizing bribe paying would cause a decline in the incidence of bribery.

India’s chief economic adviser Kaushik Basu argues that for a certain class of bribes, which possibly for want of a better word he describes as ”harassment bribes,” bribe giving should be a legitimate activity. Such bribes should be directed only toward getting services to which you and I are legally entitled at the moment, such as an income tax refund or customs clearance for an exporter’s goods.

In a working paper, Mr. Basu argues that decriminalizing bribe paying would cause a sharp decline in the incidence of bribery. The reasoning he offers involves game theory, which tries to analyze how players will act in situations where the outcome also depends on the behavior of others. He suggests that once the law is altered in this manner, the interests of the bribe giver and the bribe taker will be at odds—and that will help reduce corruption.

In theory, once a demand for a bribe has been satisfied—and the service received, one presumes—the bribe giver may be interested in cooperating in getting the bribe taker caught, knowing that he or she will not face any punishment. That possibility could deter the bribe taker from taking a bribe in the first place. Right now, the interests of both converge, since both payer and taker face punishment if caught, and so the payer has a reduced interest in uncovering bribery.

In his postulation, Mr. Basu clarifies that the act of bribe taking is still considered illegal, and the total punishment meted out for bribery may still be the same. He says that if under the existing system, the bribe giver and the bribe taker are fined x rupees each if caught, under his proposed regime the bribe taker should pay the full amount if caught and the bribe giver nil.

Mr. Basu’s radical suggestion is sure to generate wide chatter especially in the current context of moral outrage at the manifestation of corruption in all walks of life—be it the allocation of telecom spectrum to phone companies, the spiriting away of black money in undeclared overseas accounts, the spending and general mismanagement of the Commonwealth Games, or the appropriation by politicians of housing facilities meant for war widows and veterans.

The Hong Kong-based Political & Economic Risk Consultancy recently bracketed India, along with countries like Cambodia and Indonesia as among the most corrupt nations in the Asia Pacific region.

Mr. Basu, while justifying his thesis, however does make the case that in the end there is no alternative to building up the values of honesty and integrity in society.

The working paper is part of a series that Mr Basu has initiated in the Ministry of Finance as part of his endeavor to push more research in government.

“In the rush to produce urgent policy documents and briefing notes that any government has to do, it is easy to let matters that may not be quite as urgent to go unattended,” he says in his introduction to the paper.

Mr. Basu had last year lamented to India Real Time that policy-making takes most of his time, leaving little time for academic research. But this month, he has two new books out.

The first is called ”Beyond The Invisible Hand,” in which he outlines how Adam Smith’s theory of the free markets has been misinterpreted over the years. The second, “An Economist’s Miscellany,” is a collection of multidisciplinary writings on the worlds of academia, politics and policy. In an interview posted by his Indian publisher, Permanent Black, Mr. Basu put Jean-Jacques Rousseau’s ”Confessions,” Katharine Tait’s ”My Father, Bertrand Russell,” about the British philospher, Franz Kafka’s opus on bureaucracy “The Trial” and “any one P.G. Wodehouse” among his recommended readings.

In the interview, he pointed out that he doesn’t include the Economic Survey for the financial year from April 1, 2010 , to March 31, 2011, which he largely authored, in the list of books he would recommend that his friends read. But he said that work does mean a lot to him as it ”swallowed up the better part of my life” in the last several months.

What do you think? Is this a good way to reduce India’s culture of bribery?

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